Private Sector Capital

The private economic sector is playing an increasingly important role in the Vietnamese economy: contributing about 50% of GDP and employing more than 80% of the social labor force. However, to realize the goal of Resolution 68-NQ/TW on private economic development (by 2030, the private sector accounts for 55-58% of GDP and contributes 35-40% of total budget revenue), the core issue that needs to be resolved is the source of capital for this sector.

A report at the recent workshop “Capital for the private sector in the new growth era” said that in the period of 2021-2023, credit for the private enterprise sector only accounted for 34-36% of total outstanding loans, lower than that of the state-owned enterprise and FDI enterprises. Small and medium-sized enterprises (SMEs) - accounting for more than 97% of the total number of enterprises - only had access to about 25% of total credit.

Meanwhile, capital from the stock market and corporate bonds is still limited: the size of the stock market capitalization accounts for 71.4% of GDP in 2024, much lower than that of other countries in the region; after the hot growth period of 2020-2021, the development of corporate bonds has not yet reached expectations.

A paradox is that although the Government advocates strong development of the private sector, according to a research report by Dr. Can Van Luc - member of the National Financial and Monetary Policy Advisory Council and a group of authors from BIDV Training and Research Institute, the rate of enterprises having to manage capital internally and from relatives still accounts for 70%, nearly 50% of SMEs have difficulty accessing bank credit.

So what is the reason? First of all, the Vietnamese financial system is still too dependent on bank credit: accounting for more than 130% of GDP. Meanwhile, medium and long-term capital channels such as the stock market, venture capital funds, pension funds, etc. are developing slowly. Private enterprises, especially innovative startups, find it difficult to find venture capital or long-term capital to invest in technology.

Second, the legal framework for the capital market is not yet complete. Monitoring and transparency of information on the corporate bond market are still limited, leading to a decline in investor confidence, causing the market to not recover strongly after the events of 2022. Third, many preferential policies on tax and credit have not yet been implemented. SMEs still face difficulties when they want to access preferential credit packages or credit guarantee funds.

In the new context, according to experts, removing capital bottlenecks for the private sector needs to be implemented synchronously at both macro and micro levels. First, it is necessary to diversify capital mobilization channels other than bank credit. The Government needs to promote the development of the stock market and corporate bond market; encourage the formation of venture capital funds, private investment funds, and pension funds to provide long-term capital for enterprises.

The second is to improve the credit guarantee mechanism and tax incentives for SMEs. Tax policies need to encourage businesses to reinvest and innovate instead of focusing only on short-term obligations. The third is to create a favorable legal corridor for creative startups. Vietnam currently has more than 3,800 startups, so it needs a mechanism to encourage foreign investment funds to participate and reduce legal barriers to make it easier for startups to raise capital.

In addition, green and sustainable financial development is an inevitable trend when Vietnam commits to Net Zero by 2050. This requires a mechanism to encourage capital to flow into renewable energy projects and circular economy . Finally, enterprises must improve financial transparency and standardize governance to create trust for banks and investors.

Capital is the “blood vessel” of the economy and for the private sector – the most important driving force of the economy – unlocking capital sources becomes even more urgent in the new era. If solutions to diversify capital channels, improve institutions and enhance market confidence are implemented decisively, Vietnam can open a cycle of sustainable growth in which the private sector truly becomes the “pillar” of the economy.

HA MY

Source: https://www.sggp.org.vn/nguon-von-cho-khu-vuc-tu-nhan-post811393.html